Many taxpayers with collections issues will tell you about the fear they experience when they go to the checkout at the grocery store and pull out their Interac card, and that is because many of them would have been subject at some point, to having their bank account frozen by the CRA.

Collectors can issue RTPs to banks, resulting in an account being frozen to the taxpayer and the balance in the account being forwarded to the CRA if the amount in the account is less than the tax owing. In cases where there is enough money in the account to pay the taxes in full, the bank sends that amount to the CRA and the taxpayer is free to use their account afterwards.  Cash flow for the month is destroyed.  Payroll is often missed as a result, but the bank account is open and the tax debt is paid.

The nice thing about these RTPs to banks is that they don’t prevent a taxpayer from opening a new account in the mean while. The rule is that the CRA can’t go fishing to find new accounts. They find out about them instead from other means, including by receiving payments from the taxpayer.  So remember that an RTP doesn’t go out to an entire bank.  It goes out to a certain branch where the CRA knows the taxpayer banks.

It is also important to remember that while a bank account is frozen, any monies deposited will go directly to the CRA.  So it is necessary to either negotiate for the RTP to be lifted or to find a new place to bank.

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